Profits gained from the sale of stock.

• A. Capital Gains
• B. Dividends
• C. Income
• D. Interest

Answer: (A)

Capital gains are the profits you make when you sell stock for more than you paid for it. The amount of the gain is the difference between the sale price and your cost basis. How long you’ve held the stock changes how the gain is taxed: if you own it for a year or less, the gain is typically taxed at ordinary income rates (short-term); if you own it for more than a year, it’s a long-term capital gain, usually at a lower rate. This is separate from dividends, which are cash distributions of a company’s profits, and from interest or other forms of income. Remember that gains are realized only when you actually sell; until then, any rise in price is an unrealized gain.